Floods Plant Seeds of Change in Federal Crop Insurance : Agriculture: White House officials, lawmakers are searching for ways to get more farmers to join program instead of relying on disaster relief.

WASHINGTON — As Congress prepares to approve emergency payments to farmers whose fields were destroyed by floods in the Midwest, lawmakers and White House officials are again urging steps to induce more farmers to prepare for such disasters by buying federal crop insurance.

Severe flooding in nine states has prompted President Clinton to request at least $3 billion in disaster relief aid, including $1.1 billion for emergency payments to farmers--most of it going to those who refused to buy crop insurance.

Federal crop insurance officials estimate that their agency will pay claims of $720 million, with farmers who bought insurance recovering at least twice as much as farmers who receive only emergency aid.

Calling the current system "the worst of all possible worlds," Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Agriculture Committee, said the floods are "the ringing bell (signaling) that we've got to reform the program."

Congress overhauled the federal crop insurance program in 1980, hoping that the changes would attract near-universal participation and end farmers' reliance on disaster relief. Yet lawmakers now find themselves preparing to approve emergency payments to farmers for the sixth time in as many years.

The Federal Crop Insurance Corp. was established in 1938 when private agencies were no longer willing to provide farmers with insurance against droughts, earthquakes, floods and other natural perils. The agency's role was a minor one until 1980, when Congress doubled the list of crops eligible for coverage--now totaling 50--and authorized subsidies for crop insurance premiums.

The changes enticed some farmers to enroll, but a majority still declined. Crop insurance accounted for just 24% of the $25 billion in federal disaster assistance distributed to farmers in the 1980s, according to a recent General Accounting Office report. The Agriculture Department estimates that just a third of eligible acres across the country currently are covered. Of the flooded farmlands in the Midwest, less than half are insured.

A Congressional Research Service report last year found that the major reason farmers do not join is simple: Disaster relief is free. Farmers know that when a natural disaster strikes, they will get emergency relief payments from the government whether they are insured or not. And unless the safety net of emergency payments is removed, the report said, farmers probably will continue to see little reason for purchasing crop insurance.

Lawmakers have been painfully aware of this situation for years but see it as a Catch-22 situation. Every time they authorize emergency relief, they send a signal to farmers that crop insurance is unnecessary. Yet with participation in the program so low, they do not believe that they can deny emergency aid when disaster strikes.

"Until you have well over 50% participation and probably more like 75%, it is going to be hard for any congressman or any President to stand up and say: 'I'm willing to let those farmers go broke,"' said Rep. Glenn English (D-Okla.), who serves on the House Agriculture Committee. "That's just a political reality."

The congressional report said there are other reasons more farmers do not join. Some complain that the program is too expensive and that--even if they enroll in the most extensive plan--the deductible is so high that they still must absorb 25% losses before coverage begins, the report said.

Another deterrent is inadequate coverage, the report said. Most policies only cover crops already planted and do not cover losses farmers suffer when natural disasters prevent them from planting.

Crop insurance officials said the insurance fee of $6 to $9 an acre is easily affordable for farmers. They point out that losses above the deductible are fully covered, while disaster relief offers only partial reimbursement after an even larger deductible. Finally, they said, coverage of so-called "prevented-planting" losses is available for an extra charge.

The simplest solution at this point, some lawmakers said, may be to repeal the 1980 law overhauling the program. "If it can't be made to work, and we're approaching the point to determine that, then obviously the answer is to go back to a disaster program," English said.

That idea is not new. The George Bush Administration in 1991 suggested abandoning crop insurance and creating a disaster relief pool that would be tapped when needed. Advocates argued that the annual congressional appropriations to the pool would be much lower than the amount the government now spends on various forms of insurance and disaster relief for farmers.

But Congress was reluctant to forsake a program that once seemed so promising, and the Bush Administration quickly withdrew the proposal.